Stratasys Ltd. (Nasdaq:
SSYS), headquartered in Minneapolis, Minnesota
and Rehovot, Israel, is a leading global provider of 3D printing and
additive manufacturing solutions. The company's patented FDM® and
PolyJet™ 3D Printing technologies produce prototypes and manufactured
goods directly from 3D CAD files or other 3D content. Systems include 3D
printers for idea development, prototyping and direct digital
manufacturing. Stratasys subsidiaries include MakerBot and Solidscape,
and the company operates the digital parts manufacturing service
Stratasys Direct Manufacturing. Stratasys has more than 2,900 employees,
holds over 800 granted or pending additive manufacturing patents
globally, and has received more than 30 awards for its technology and
leadership. Online at:
http://www.stratasys.com
or
http://blog.stratasys.com.

Stratasys Ltd.

Consolidated Balance Sheets

(in thousands)

June 30,

December 31,

2015

2014

ASSETS

Current assets

Cash and cash equivalents

$

352,268

$

442,141

Short-term bank deposits

150,370

595

Accounts receivable, net

136,970

150,806

Inventories

137,394

123,385

Net investment in sales-type leases

10,091

8,170

Prepaid expenses

9,898

7,931

Deferred income taxes

30,567

25,697

Other current assets

31,420

37,903

Total current assets

858,978

796,628

Non-current assets

Goodwill

1,172,125

1,323,502

Other intangible assets, net

517,085

597,903

Property, plant and equipment, net

185,992

157,036

Net investment in sales-type leases - long term

19,093

14,822

Other non-current assets

10,960

9,216

Total non-current assets

1,905,255

2,102,479

Total assets

$

2,764,233

$

2,899,107

LIABILITIES AND EQUITY

Current liabilities

Accounts payable

$

40,687

$

37,359

Short term debt

175,000

50,000

Accrued expenses and other current liabilities

50,990

47,760

Accrued compensation and related benefits

45,230

42,332

Obligations in connection with acquisitions

12,003

28,092

Deferred revenues

48,821

45,023

Total current liabilities

372,731

250,566

Non-current liabilities

Obligations in connection with acquisitions - long term

12,761

26,461

Deferred tax liabilities

36,293

55,835

Deferred revenues - long-term

6,069

5,946

Other non-current liabilities

26,677

25,091

Total non-current liabilities

81,800

113,333

Total liabilities

454,531

363,899

Redeemable non-controlling interests

2,564

3,969

Equity

Ordinary shares, NIS 0.01 nominal value, authorized 180,000

shares; 51,669 and 50,923 shares issued and outstanding

at June 30, 2015 and December 31, 2014, respectively

140

139

Additional paid-in capital

2,587,168

2,568,149

Accumulated deficit

(273,090

)

(33,871

)

Accumulated other comprehensive loss

(7,429

)

(3,647

)

Equity attributable to Stratasys Ltd.

2,306,789

2,530,770

Non-controlling interest

349

469

Total equity

2,307,138

2,531,239

Total liabilities and equity

$

2,764,233

$

2,899,107

Stratasys Ltd.

Consolidated Statements of Operations

(in thousands, except per share data)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Net sales

Products

$

134,490

$

154,090

$

261,157

$

283,342

Services

47,832

24,375

93,896

46,064

182,322

178,465

355,053

329,406

Cost of sales

Products

67,666

73,394

166,037

134,416

Services

31,748

13,437

60,020

25,628

99,414

86,831

226,057

160,044

Gross profit

82,908

91,634

128,996

169,362

Operating expenses

Research and development, net

25,506

18,957

52,744

35,728

Selling, general and administrative

97,581

77,929

200,189

145,546

Goodwill impairment

-

-

150,400

-

Change in the fair value of obligations in connection with
acquisitions

(6,680

)

628

(19,936

)

(6,867

)

116,407

97,514

383,397

174,407

Operating loss

(33,499

)

(5,880

)

(254,401

)

(5,045

)

Financial income (expense)

(711

)

337

(5,835

)

(999

)

Loss before income taxes

(34,210

)

(5,543

)

(260,236

)

(6,044

)

Income tax benefit

(11,066

)

(5,370

)

(20,688

)

(9,958

)

Net income (loss)

(23,144

)

(173

)

(239,548

)

3,914

Net loss attributable to non-controlling interest

(213

)

-

(329

)

-

Net income (loss) attributable to Stratasys Ltd.

$

(22,931

)

$

(173

)

$

(239,219

)

$

3,914

Net income (loss) per ordinary share attributable to Stratasys
Ltd.

Basic

$

(0.48

)

$

(0.00

)

$

(4.71

)

$

0.08

Diluted

(0.55

)

(0.00

)

(4.77

)

0.08

Weighted average ordinary shares outstanding

Basic

51,405

49,373

51,181

49,323

Diluted

51,870

49,373

51,413

51,238

Stratasys Ltd.

Reconciliation of GAAP to Non-GAAP Results of Operations

(in thousands, except per share data)

Three Months Ended June 30, 2015

Three Months Ended June 30, 2014

GAAP

Non-GAAP

GAAP

Non-GAAP

(unaudited)

Adjustments*

(unaudited)

(unaudited)

Adjustments*

(unaudited)

Net sales

Products

$

134,490

$

-

$

134,490

$

154,090

$

-

$

154,090

Services

47,832

-

47,832

24,375

-

24,375

182,322

-

182,322

178,465

-

178,465

Cost of sales

Products

67,666

(15,975

)

51,691

73,394

(14,739

)

58,655

Services

31,748

(841

)

30,907

13,437

(340

)

13,097

99,414

(16,816

)

82,598

86,831

(15,079

)

71,752

Gross profit

82,908

16,816

99,724

91,634

15,079

106,713

Operating expenses

Research and development, net

25,506

(3,016

)

22,490

18,957

(1,318

)

17,639

Selling, general and administrative

97,581

(24,020

)

73,561

77,929

(17,617

)

60,312

Change in the fair value of obligations in connection with
acquisitions

(6,680

)

6,680

-

628

(628

)

-

116,407

(20,356

)

96,051

97,514

(19,563

)

77,951

Operating income (loss)

(33,499

)

37,172

3,673

(5,880

)

34,642

28,762

Financial income (expense)

(711

)

-

(711

)

337

-

337

Income (loss) before income taxes

(34,210

)

37,172

2,962

(5,543

)

34,642

29,099

Income taxes (benefit)

(11,066

)

6,279

(4,787

)

(5,370

)

6,475

1,105

Net income (loss)

(23,144

)

30,893

7,749

(173

)

28,167

27,994

Net loss attributable to non-controlling interest

(213

)

-

(213

)

-

-

-

Net income (loss) attributable to Stratasys Ltd.

$

(22,931

)

$

30,893

$

7,962

$

(173

)

$

28,167

$

27,994

Net income (loss) per ordinary share attributable to Stratasys
Ltd.

Basic

$

(0.48

)

$

0.15

$

(0.00

)

$

0.57

Diluted

(0.55

)

0.15

(0.00

)

0.55

Weighted average ordinary shares outstanding

Basic

51,405

51,405

49,373

49,373

Diluted

51,870

52,705

49,373

51,196

The Company considers these non-GAAP measures to be indicative of
its core operating results and facilitates a comparison of
operating results across reporting periods. The Company uses these
non-GAAP measures when evaluating its financial results as well as
for internal planning and forecasting purposes, however these
measures should not be viewed as a substitute for the Company’s
GAAP results.

* Refer to the "Reconciliation of Non-GAAP Adjustments" herein for
further information regarding adjustments.

Stratasys Ltd.

Reconciliation of GAAP to Non-GAAP Results of Operations

(in thousands, except per share data)

Six Months Ended June 30, 2015

Six Months Ended June 30, 2014

GAAP

Adjustments*

Non-GAAP

GAAP

Adjustments*

Non-GAAP

Net sales

Products

$

261,157

$

-

$

261,157

$

283,342

$

235

$

283,577

Services

93,896

-

93,896

46,064

-

46,064

355,053

-

355,053

329,406

235

329,641

Cost of sales

Products

166,037

(61,887

)

104,150

134,416

(28,468

)

105,948

Services

60,020

(2,250

)

57,770

25,628

(774

)

24,854

226,057

(64,137

)

161,920

160,044

(29,242

)

130,802

Gross profit

128,996

64,137

193,133

169,362

29,477

198,839

Operating expenses

Research and development, net

52,744

(5,833

)

46,911

35,728

(2,813

)

32,915

Selling, general and administrative

200,189

(56,864

)

143,325

145,546

(31,140

)

114,406

Goodwill impairment

150,400

(150,400

)

-

-

-

-

Change in the fair value of obligations in connection with
acquisitions

(19,936

)

19,936

-

(6,867

)

6,867

-

383,397

(193,161

)

190,236

174,407

(27,086

)

147,321

Operating income (loss)

(254,401

)

257,298

2,897

(5,045

)

56,563

51,518

Financial expense

(5,835

)

-

(5,835

)

(999

)

-

(999

)

Income (loss) before income taxes

(260,236

)

257,298

(2,938

)

(6,044

)

56,563

50,519

Income taxes (benefit)

(20,688

)

8,093

(12,595

)

(9,958

)

11,884

1,926

Net income (loss)

(239,548

)

249,205

9,657

3,914

44,679

48,593

Net loss attributable to non-controlling interest

(329

)

-

(329

)

-

-

-

Net income (loss) attributable to Stratasys Ltd.

$

(239,219

)

$

249,205

$

9,986

$

3,914

$

44,679

$

48,593

Net income (loss) per ordinary share attributable to Stratasys
Ltd.

Basic

$

(4.71

)

$

0.20

$

0.08

$

0.99

Diluted

(4.77

)

0.19

0.08

0.95

Weighted average ordinary shares outstanding

Basic

51,181

51,181

49,323

49,323

Diluted

51,413

52,524

51,238

51,221

The Company considers these non-GAAP measures to be indicative of
its core operating results and facilitates a comparison of
operating results across reporting periods. The Company uses these
non-GAAP measures when evaluating its financial results as well as
for internal planning and forecasting purposes, however these
measures should not be viewed as a substitute for the Company’s
GAAP results.

* Refer to the "Reconciliation of Non-GAAP Adjustments" herein for
further information regarding adjustments.

Stratasys Ltd.

Reconciliation of Non-GAAP Adjustments

(in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

Net sales, products

Deferred revenue step-up

$

-

$

-

$

-

$

235

Cost of sales, products

Acquired intangible assets amortization

(12,301

)

(14,029

)

(27,206

)

(27,254

)

Other intangible assets impairment

-

-

(29,782

)

-

Non-cash stock-based compensation expense

(1,237

)

(710

)

(2,462

)

(1,214

)

Reorganization and other related costs

(2,437

)

-

(2,437

)

-

(15,975

)

(14,739

)

(61,887

)

(28,468

)

Cost of sales, services

Non-cash stock-based compensation expense

(560

)

(324

)

(1,168

)

(732

)

Reorganization and other related costs

(75

)

-

(75

)

-

Merger and acquisition related expense

(206

)

(16

)

(1,007

)

(42

)

(841

)

(340

)

(2,250

)

(774

)

Research and development, net

Non-cash stock-based compensation expense

(1,506

)

(885

)

(3,374

)

(1,823

)

Reorganization and other related costs

(617

)

-

(617

)

-

Merger and acquisition related expense

(893

)

(433

)

(1,842

)

(990

)

(3,016

)

(1,318

)

(5,833

)

(2,813

)

Selling, general and administrative

Acquired intangible assets amortization

(5,684

)

(5,507

)

(12,140

)

(10,871

)

Non-cash stock-based compensation expense

(6,261

)

(5,159

)

(12,320

)

(10,045

)

Merger and acquisition related expense

(5,937

)

(6,951

)

(12,842

)

(10,224

)

Reorganization and other related costs

(6,138

)

-

(6,139

)

-

Impairment charges

-

-

(13,423

)

-

(24,020

)

(17,617

)

(56,864

)

(31,140

)

Goodwill impairment

-

-

(150,400

)

-

Change in the fair value of obligations in connection with
acquisitions

Change in the fair value of obligations in connection with
acquisitions